Retirement Awaiters

Financial Planning for Retirement Awaiters

It seems a part of the quintessential American Dream to be able to one day retire, safe and secure with a substantial nest egg to meet your needs for retirement. If you’re among the average American demographic of retirees, you’re apt to spend about 20 years in retirement. But according to the Employee Benefits Security Administration, roughly only half of Americans have currently calculated the amount they will need to save to retire. And saving is but one part of retirement’s overarching picture. Successful retirement planning consists of several essential elements. 

Your desired retirement situation is distinctive to your personal lifestyle preferences and choices. Start retirement planning by determining how much you will need to save in order to retire at the age you want. Estimating your future income needs can seem daunting, but it is wise to estimate replacing about 70-90% of your annual pre-retirement income with your Social Security benefits (which you can begin collecting as early as age 62) and your savings. 

Saving for the future is a crucial investment in yourself. If you are receiving weekly or monthly paychecks, it is recommended that–if possible–you put aside roughly 15% of every check for retirement. Naturally, starting as early as you can is preferable, but even starting your retirement savings in your 30s or 40s will be beneficial for you in time. 

If it is offered, you should take advantage of your employer’s 401(k) plan. This employer-based retirement account and investing plan is one of the easiest and smartest means of retirement savings. Not only do you receive a tax break on the money you contribute to your 401(k), automatic paycheck deductions make putting the money aside super simple and straightforward. If your employer offers 401(k) matching, they will invest a percentage of your contributions into the account for you, as well. As of 2022, 401(k)s have an annual contribution limit of $20,500 or $27,000 for employees age 50 or older. 

While we recommend investing in 401(k)s, this is not an option for every employee. Individual Retirement Accounts–IRAs–are a secondary option. You can open your own IRA at any time, and based on the type of account you want–namely, traditional, Roth, SEP and SIMPLE–you will have differing account limits that may or may not be tax deductible. Learn about all of the options before committing to one. 

Consider shifting your investments to more conservative options as you get closer to retirement age. Many near-retirees change their investments to a low-cost mix of stocks and bonds suitable to their personal risk tolerance: how much of a portfolio loss you’re willing to undertake and which is dependent upon a host of factors including–but not limited to–financial goals, income, and age.

At WR Wealth Planners, we believe that the best time to plan for retirement was yesterday. The second best time is today. Schedule a call with us to get started. 

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Tom Markowitz, PhD

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